CARI Captures Issue 627: Sliding currencies bring higher import costs and inflationary pressures for ASEAN

ASEAN 
Sliding currencies bring higher import costs and inflationary pressures for ASEAN
(16 October 2023) Several Southeast Asian currencies are trading near their lows for the year against a surging US Dollar, bringing higher import costs and inflationary pressures to their economies. The Malaysian ringgit and the Thai baht are the worst performers in Southeast Asia in 2023, falling 6.9% and 4.4%, respectively, against the US Dollar through 13 October, 2023. Meanwhile, the Vietnamese dong is down 3.4%, while Singapore’s dollar and Indonesia’s rupiah have slipped a more modest 2.1% and 0.7%, respectively. The broader depreciation comes amidst a surging US Dollar being fueled by strong US economic and wage growth. Exporters have been unable to take advantage of a weaker currency due to a sluggish Chinese economy, with China being the main trading partner for most ASEAN economies. 

ASEAN 
Southeast Asia’s dairy industry attracts private equity deals
(17 October 2023) Southeast Asia’s nascent dairy industry is attracting private equity (PE) deals hoping to cash in on the growing consumption of dairy products within the region. The growth of the regional dairy industry is being fueled by favorable demographics, a growing middle class, and higher discretionary spending. PE firm Growtheum announced an investment of US$100 million in Viet Nam-based International Dairy Products (IDP) in April 2023. In August 2023, Growtheum injected US$70 million into Indonesia’s KIN Dairy. As well for this year, General Atlantic made a US$130 million investment into Indonesian dairy products and foods company PT Cisarua Mountain Dairy (Cimory), while Vietnamese colostrum milk producer VitaDairy is looking to sell a 30% stake. Several challenges facing Southeast Asia’s dairy industry include fragmented farming practices and underdeveloped logistics infrastructure.  

ASEAN 
ASEAN states expanding their major airports to meet rising domestic demand
(18 October 2023) Several ASEAN are seeking to expand their major airports to meet rising domestic demand as well as to attract foreign direct investment and tourism. Air passenger demand in the region is expected to nearly triple in the two decades from 2019, with the region’s average annual growth rate of 4.6% higher than the global average of 3.4%. In Thailand, a new satellite terminal opened at Suvarnabhumi Airport near Bangkok in September 2023 which can host up to 28 aircraft and handle 15 million passengers annually. In Viet Nam, US$4 billion will be invested to increase the capacity of Hanoi’s Noi Bai International Airport to 60 million passengers by 2030, 2.5 times its current amount.

ASEAN, JAPAN 
Japanese automakers dominance of Southeast Asia challenged by Chinese and Korean EVs
(16 October 2023) Japanese automakers traditional dominance of Southeast Asia is being challenged by Chinese and South Korean manufacturers within the new field of electric vehicles (EVs). These companies have started sales of imported EVs in the region, while also planning for local production in the near future. Japanese cars comprise 80% of new car sales in Southeast Asia, making the region a key overseas market for them. Japanese automakers are more cautious when it comes to EVs due to a lack of recharging facilities within the region, as well as the region’s high temperatures and humidity which causes batteries to deteriorate more quickly. However, certain Japanese automakers have taken tentative steps towards EVs, with Mitsubishi Motors seeking to produce EVs in Indonesia while Toyota Motor and Honda are preparing to produce them in Thailand.     

INDONESIA 
Indonesia reports US$3.42 billion trade surplus in September 2023
(16 October 2023) Indonesia reported a US$3.42 billion trade surplus in September 2023, compared with a Reuters poll expecting a US$2.13 billion surplus. In August 2023, Indonesia reported a US$3.12 billion surplus. The higher-than-expected trade surplus was attributed to an unexpectedly large drop in imports, measuring at US$17.34 billion in September, a 12.45% drop year-on-year. On the other hand, exports dropped 16.17% year-on-year to US$20.76 billion. Indonesia has seen exports decline in recent months due to falling commodity prices and weakening global trade, especially with regard to the country’s major exports of palm oil, coal, and nickel.

VIET NAM 
GDP increases by 5.33% year-on-year in third quarter of 2023
(18 October 2023) According to government reports presented at the 27th session of the National Assembly (NA) standing committee, GDP is estimated to have increased by 5.33% year-on-year in the third quarter of 2023. In comparison, GDP growth in the first and second quarters of 2023 was 3.28% and 4.05%, respectively. GDP growth for 2023 is forecast to exceed 5%, while Viet Nam’s trade surplus will reach approximately US$15 billion. In the last nine months of 2023, average incomes increased by 6.8% year-on-year. The key growth drivers of investments, exports, and consumption in Viet Nam are expected to face systematic challenges caused by a lack of long-term direction, and prompt intervention with regards to green transformation, energy efficiency, and circular economy.

SINGAPORE 
Key exports from Singapore extend their 12th straight month of decline in September 2023
(18 October 2023) Key exports from Singapore extended their 12th straight month of decline in September 2023, with non-oil domestic exports falling by 13.2% year-on-year. This followed a revised 22.5% contraction in August. Exports in September were also up 11.1% month-on-month, compared to the 6.6% fall in August. Non-electronic non-oil domestic exports declined by 13.6% year-on-year, with non-monetary gold, pharmaceuticals, and food preparations contributing the most to the decline. Meanwhile, electronics shipments fell 11.6% year-on-year in September. Integrated circuits, personal computers, and parts of personal computers contributed the most to the fall. Total trade declined by 12.3% year-on-year in September, following a 15.5% contraction in August.  

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CHINA 
GDP likely to grow by 4.4% year-on-year in third quarter of 2023 according to Reuters poll
(16 October 2023) According to a median forecast of 60 economists polled by Reuters, China’s GDP likely grew by 4.4% year-on-year in the third quarter of 2023. This would be a slowdown from the 6.3% growth recorded in the second quarter. China’s economy had started to slow down in the second quarter following a downturn in the property sector and huge debts tied to decades of infrastructure outlays. On a quarterly basis, GDP is forecast to grow 1.0% in the third quarter of 2023, versus growth of 0.8% in the previous quarter. The Reuters poll also predicted that China’s economy would expand by 5.0% in 2023, in line with Beijing’s own target but below the 5.5% forecast made in July 2023. Growth is expected to slow down to 4.5% in 2024.

SOUTH KOREA 
South Korea moving to increase number of foreign workers to address labor shortages
(17 October 2023) South Korea is moving to significantly increase the number of incoming foreign workers and the range of jobs they can do to address labor shortages. In 2023, the country raised the maximum number of visas available to migrant workers from abroad to 110,000. The total number of visas available in 2022 was 88,000, also an all-time high, up drastically from the pre-COVID-19 count of 51,000 in 2019. Foreign workers in South Korea overwhelmingly work in unskilled or semiskilled jobs. Business owners have called for laws to be adjusted to make it easier for foreign nationals to take jobs in more sectors that face labor shortages, such as restaurants, accommodations, and courier services.

NEW ZEALAND 
Right-wing coalition to form government following general election on 14 October, 2023
(14 October 2023) A coalition of right-wing parties is expected to form a government following a general election held on 14 October, 2023. The centre-right National Party had acquired around 40% of ballots with 98% of votes already counted, while the ruling Labour Party has been unable to win enough votes to form a government. The nationalist NZ First party is expected to play a kingmaker role in the future coalition government alongside the libertarian, right-wing Act Party. The campaign entering the election was dominated by cost of living issues, a housing shortage, a historically high inflation rate of 6%, and an account deficit that has concerned ratings agencies. Official results will be announced by the election commission about three weeks after the vote.